The Revenue Minister believes issues in the progressivity of New Zealand's tax system "don't lie in where tax bands sit", but with what income potentially isn't being taxed.
It comes as National continues to advocate for tax thresholds to be adjusted to inflation, something the Opposition party says would help Kiwis in the face of the rising cost of living.
In April, David Parker gave a speech titled 'Shining a light on unfairness in our tax system', in which he revealed the Inland Revenue department is gathering more information on the country's tax intake, particularly what's contributed by the wealthiest New Zealanders.
"We have virtually no idea what rate of tax is paid by the very wealthy," Parker said at the time.
"As wealth concentrates into the hands of an ever smaller cohort at the very top, more and more of their income, and a greater proportion of national income, is represented by returns on capital."
He also announced a Tax Principles Act, outlining the core values of New Zealand's tax system, including that there is "some degree of overall progressivity in the rate of tax paid".
National's Nicola Willis asked Parker at the Finance and Expenditure Select Committee on Wednesday if he had sought advice on the impact that bracket creep and inflation is having on the progressivity of the system.
Parker said he hadn't.
"I obviously understand that inflation does cause fiscal drag. I understand those principles and don't need further advice to understand them," he said.
"I think the major problems in progressivity of the tax system don't lie in where tax bands sit so much as what income we don't see and don't know whether it is taxed, which is why my focus has been to try and get better information on that."
A progressive tax system is one where those with higher incomes pay a higher rate of tax than those on lower incomes.
In New Zealand, every dollar a Kiwi earns up to $14,000 is taxed at 10.5 percent, each dollar earned between $14,000 and $48,000 is taxed at 17.5 percent, between $48,000 and $70,000 it is taxed at a 30 percent rate, and between $70,000 and $180,000 it is taxed at 33 percent.
After the 2020 election, the Government also introduced a new tax rate of 39 percent for income above $180,000. National has promised to scrap this if it is elected to Government.
Willis asked Parker why it was relevant for the Government to investigate the level of capital gains received by wealthy Kiwis when it had previously ruled out a capital gains tax.
The minister said it was right to say that a CGT has been ruled out, but "the information is highly relevant to tax policy to get an understanding if the tax system is fair."
While he said his ministry is not currently working on any new taxes and the Government wouldn't introduce any this term, Willis asked Parker to rule out commencing any work on new taxes when he receives a report on the system next year.
"If you are trying to say am I planning to use the ministry to do work on a Capital Gains Tax or a Wealth tax… the answer is no," Parker said.
"I have no plans to commence any work on other taxes because I am committed to our promise that we would not introduce new taxes other than the 39 percent tax that increase taxes in this term of Government."
Parker also spoke to the Tax Working Group's view on adjusting tax thresholds to inflation. The group wrote that while bracket creep can reduce the progressivity of the system, indexing thresholds can limit the fiscal flexibility of future Governments.
"I think one of the reasons why they recommended that is that circumstances do change for Government and matters beyond their control," the minister said.
"Obviously the biggest issue beyond the control of any Government in recent years has been COVID. That has entailed many billions of dollars being spent on support for taxpayers that one day have to be paid for through the tax system. If you automatically adjusted tax bands all of the time it would be more difficult to respond."
Despite Parker saying in his April speech the Government wasn't planning to introduce new taxes, Opposition parties suggested his review into the fairness of the system was planting the seed for exactly that.
"My big take away is very clear - Labour actually wants to increase taxes, National wants to lessen taxes and the reason is very simple, this Government has spent a record amount of money with existing spending and spending to come and need to increase taxes ultimately," National leader Christopher Luxon said at the time.
"But it just sort of felt like a fishing trip and I am not really sure where it's going at the moment."
Prime Minister Jacinda Ardern was later forced to reiterate that the Government had "no intention" to introduce a wealth tax "this term" after she wouldn't rule it out in an AM interview in May.
In New Zealand, inflation in the March quarter was 6.9 percent. The Budget Economic and Fiscal Update (BEFU) in May projected annual inflation in 2023 would be 5.2 percent and remain outside of the Reserve Bank's targeted range of 1-3 percent until 2025.
